Pound slides most against the dollar since May 2010 after Boris Johnson backs Brexit

Analysts warned to expect further falls

Hazel Sheffield
Monday 22 February 2016 11:41 GMT
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The falls in the pound come after London Mayor Boris Johnson joined the campaign to leave the EU
The falls in the pound come after London Mayor Boris Johnson joined the campaign to leave the EU (Getty Images)

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The pound has seen its biggest drop against the dollar since May 2010 after Boris Johnson backed the campaign for the UK to leave the EU.

The pound dropped 1.65 per cent against the dollar to $1.4163 in morning trading on Monday, the biggest one-day drop since the general election in May 2010.

While the currency is down 3.9 percent this year, it remains above an almost seven-year low of $1.4080 reached in January.

Kit Juckes, analyst at Société Générale, said these lows may signal that the pound will drop further as the referendum draws nearer.

"I think we are likely to see further sterling weakness ahead of the vote itself, as the debate rages and uncertainty undermines confidence. I can’t imagine the opinion polls moving decisively enough in either direction for clarity to emerge before [the referendum is held on] June 23," he said.

The falls come after London Mayor Boris Johnson joined the campaign to leave the EU not long after David Cameron announced the date of the referendum on June 23.

Sam Hill, senior UK economist at RBC Capital Markets, also said that volatility would continue.

“With political reaction to Friday's deal looking more mixed than the prime minister would have hoped for, in the short term it is likely that the exchange rate will be sensitive to news which is seen to increase the probability of Brexit,” Hill said.

The pound was also down against the euro this morning, trading 1.65 per cent lower at €1.277.

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